FarmPolicy

May 28, 2016

Wal-Mart: Cage Free Eggs by 2025

Bloomberg writer Nick Turner reported yesterday that, “Wal-Mart Stores Inc., the world’s largest retail chain, will sell 100 percent cage-free eggs in the U.S. by 2025, joining an industrywide shift toward a practice that’s seen as more humane.

“As part of the transition, Wal-Mart and its Sam’s Club warehouse chain will require that its egg suppliers adopt United Egg Producers rules or an equivalent set of standards, the retailer said in a statement Tuesday. Compliance will be checked annually by a third party.

Wal-Mart sells more groceries than anyone else in the U.S., and its decisions typically sway the rest of the industry. The Bentonville, Arkansas-based company has offered cage-free eggs since 2001, though not exclusively.”

Mr. Turner noted that, “The challenge for Wal-Mart is transitioning to cage-free eggs while keeping a lid on prices, something the chain said it can do with the 2025 deadline.”

Recall that other livestock producers are also increasingly listening to consumer demands when it comes to how animal protein is manufactured.

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Ag Economy: “Financial Stress is Building”

DTN special correspondent Elizabeth Williams reported this week that, “Cautious — that’s what the farmland brokers and rural appraisers termed their mood last week at the spring meeting of the Iowa Realtors Land Institute. It may look like business as usual as planting begins, but beneath the surface, financial stress is building in farm country, Iowa Concern Hotline director Margaret Van Ginkel with Iowa State Extension would add.

“The hotline, established in 1985 during the farm financial crisis, has seen an increase in call volume this spring. ‘Questions concerning tax consequences of selling machinery or land, what if they stop making payments on machinery, worries about whether a farm operation can support two or three generations. The vulnerability is there,’ Van Ginkel said.”

The DTN article explained that, “Iowa is a bellwether state for agricultural stress, given its rapid run-up in farm incomes, land values and cash rents during corn’s 2008-12 glory years. Some lenders think the commodity fall will be harder here. One sign is that Land Institute members think the state’s farmland prices tumbled 5% on average over the last six months, according to its March 1 survey. Since 2015, Iowa land values have fallen 8.7% across the state with top-quality cropland decreasing from $9,516 per acre to $9,146, the survey found.”

Ms. Williams also noted that, “Cash rents have softened a little, Iowa farm managers and rural appraisers reported at their statewide meeting, but rents are still strong in some areas. Waverly banker Willemssen said cash rents in northeast Iowa are still in the $300- to $400-per-acre range.”

Meanwhile, a news release from North Dakota State University this week stated that, “North Dakota land values declined for the second consecutive year in 2015. This follows an 11-year period (2003 to 2014) in which cropland values averaged an annual increase of 15 percent, the strongest sustained run-up in cropland values in the past 100 years.”

The release added that, “Based on the survey, North Dakota average cropland values declined about 4 percent during 2015. Swenson noted that a report by the North Dakota Chapter of the American Society of Farm Managers and Rural Appraisers indicated a greater decline, 9 percent, for 2015.”

With respect to the implications of the tightening financial outlook, Reuters writers Tom Polansek and Karl Plume reported this week that, “North Dakota farmer Randy Thompson plans to apply 30 percent less nitrogen fertilizer to his corn this year to save money in the face of crashing crop prices.

“In Minnesota, Andy Pulk is trucking crop nutrients to his farm from 350 miles (563.3 km) away because he found a better price than his local cooperative could offer. He has also halted purchases of machinery.”

The article noted that, “With more acres than ever before likely to be planted with soybeans and corn in the U.S. Midwest this year, companies including seed maker Monsanto Co and fertilizer seller CF Industries Holdings might have expected a windfall for earnings.

“But with grain prices near five-year lows and farm incomes at their lowest levels since 2002, growers are tightening their belts by reducing spending on everything from fertilizer to seeds to chemicals.”

And, Jacob Bunge and Lisa Beilfuss reported today at The Wall Street Journal Online that, “Monsanto said profit tumbled in its latest quarter as the St. Louis-based maker of Roundup weed killer continues to grapple with an unfavorable agricultural market.

“The company is struggling with a sharp downturn in the U.S. farm economy and pressures in overseas markets. U.S. farmers’ incomes are projected to fall to their lowest level since 2002 after grain and oilseed prices sagged for three straight years due to a string of bumper harvests. The strength of the U.S. dollar has meanwhile made Monsanto’s products more expensive overseas.”

The Journal writers pointed out that, “In its latest quarter, Monsanto’s revenue from seeds and genomics, its biggest business, fell 8.6% as sales of most seed types declined. Sales in its agricultural productivity segment slid 30% to $715 million.”

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More Companies Move to Label #GMO Food Products

Categories: Biotech

Christopher Doering reported on the front page of the business section in yesterday’s Des Moines Register that, “More food companies are voluntarily disclosing if their products contain genetically modified ingredients, the latest sign that consumer groups may be gaining ground in their campaign to get a nationwide mandatory label.

“In just the past few weeks, candy-maker Mars, General Mills, Kellogg and ConAgra all announced they would be voluntarily labeling their products. They joined Campbell Soup, which became the first major food company to disclose the presence of genetically engineered organisms in January.

“Food executives say they have no choice but to include the ingredients on labels, citing growing pressure from consumers to know what’s in their food, a failure by Congress to adopt a nationwide standard, and the fact that Vermont on July 1 becomes the first state to require labeling.”

Mr. Doering explained that, “Companies that overhaul their label now, rather than wait, not only benefit by earning the trust of their customers, but they can potentially have a larger influence over how future state labels will look, food companies said.”

The Register article added that, “Sen. Chuck Grassley, R-Iowa, said he was not optimistic Congress could reach a deal before Vermont’s law takes effect this summer.”

Secretary of Agriculture Tom Vilsack has also recently expressed his views on the labeling issue, and Politico’s Morning Agriculture indicated today that, “After the failed effort to limit debate on Senate Agriculture Committee Chairman Pat Roberts’ voluntary GMO labeling bill last month, the Kansas Republican and other supporters vowed to try again when they returned from the two-week spring break. Now that they’re back, can middle ground be found to lure enough farm-state Democrats and states’-rights Republicans to vote for the bill? Talks on how to move forward could start this week, especially given that there are fewer than 90 days before Vermont’s mandatory GMO labeling law takes effect.”

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U.S. Ag Economy: “Mounting Pressure”

Nathan Kauffman, the Assistant Vice President and Omaha Branch Executive at the Federal Reserve Bank of Kansas City, indicated in a recent article (“Mounting Pressure in the U.S. Farm Sector“) that, “U.S. farm income has continued to decline, and is expected to remain low as planting season approaches across the country. The USDA projects real net farm income to be slightly less than a year ago; that projection would mark the second-lowest farm income total in more than 30 years (Chart 1). Prolonged weakness in the farm sector primarily has been driven by several consecutive years of low crop prices and persistently elevated input costs, while recent weakness in the livestock sector also has been a factor.”

Chart 1

The Fed update pointed out that, “The need for financing, and the potential for future financial stress, has continued to increase throughout U.S. farm country. Loan demand in the Tenth District is expected to increase again in the first quarter of 2016, which would be the third consecutive year in which lending needs in the farm sector increased relative to the previous year (Chart 3). Similarly, bankers responding to the fourth quarter survey indicated they expect loan renewals and extensions to continue to accelerate. Conversely, the rate at which loans are repaid at agricultural banks in the District was expected to soften further.

“Persistently strong loan demand at agricultural banks has been coupled with reports of increasing use of USDA Farm Loan Programs through the Farm Service Agency (FSA). From 2013 to 2015, FSA loan volumes increased more than 40 percent (Chart 4).”

Chart 4

The Fed update also noted that, “Despite strong loan demand and an increase in the federal funds target rate in December, interest rates on most farm loans have remained historically low. In fact, interest expenses for U.S. corn producers accounted for only 9 cents per bushel of production in 2014, the latest year for which data are currently available.”

Meanwhile, a recent update by Kevin Patrick, Ryan Kuhns, and Allison Borchers at Choices Online (“Recent Trends in U.S. Farm Income, Wealth, and Financial Health“) stated that, “The continued drop in farm sector income is expected to place downward pressure on farm asset values, which had appreciated during the previous several years. The resulting drop in liquidity from multiple years of lower income is also expected to increase the need for sector borrowing relative to the 2009-2013 period. As a result, the USDA predicts a decline in sector equity and an increase in leverage, which signals the potential building of financial stress within the farm sector. A portion of U.S. farm businesses are highly leveraged and are at increased risk of default. While measures of financial health are worsening relative to the profitable 2009-2013 period, they remain better than historic averages.”

And Rick Barrett reported in yesterday’s Milwaukee Journal Sentinel that, “Carrie Mess, like most dairy farmers, is losing money every time the cows are milked on her farm near Watertown.

“As farmers gear up for spring planting, those who sell crops on the commodities markets stand to lose buckets of money from low prices that are beyond their control.

“Simply put, what many farmers are paid for milk, grain or livestock now isn’t enough to cover their expenses. They’re taking out loans and tapping savings to remain in business, going to work every day knowing that it’s costing them money.”

With respect to other potential impacts of a slumping U.S. ag economy, the AP reported today that, “Kansas farm co-ops are feeling pressure to merge as shrinking farm incomes have producers looking for ways to cut their costs.

“In about six weeks, Farmers Cooperative Elevator in Garden Plain will vote on whether to merge with co-ops in Anthony and Kiowa. Andale Farmers Co-op voted in December to merge with Kanza Co-op, a large operation based in the Pratt County town of Iuka.”

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SNAP Issues (Food Stamps)- Some States Reimpose Limits as Employment Improves

Categories: Nutrition

Robert Pear reported in Saturday’s New York Times that, “Hundreds of thousands of people could soon lose food stamps as states reimpose time limits and work requirements that were suspended in recent years because of high unemployment, state officials and advocates for the poor said Friday.

“Liberal groups said that many unemployed childless adults with low incomes could be cut off, starting this month, as a result of the time limits, which date back to the 1996 welfare law.

“About 45 million people receive benefits in the food stamp program, now known as the Supplemental Nutrition Assistance Program, or SNAP. The Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group, estimates that 500,000 to a million people will lose benefits this year.”

The Times article noted that, “‘Able-bodied adults without dependents are eligible for SNAP for only three months in any three-year period unless they are working or participating in qualifying education and training activities,’ said Kevin W. Concannon, the under secretary of agriculture in charge of food assistance programs.

“During and after the latest recession, which ended in mid-2009, most states qualified for waivers from the time limits. But the time limits will be in effect this year in more than 40 states. In 22 states, the limits are coming back for the first time since the recession.

As the economy improves, the Food and Nutrition Service said, many places no longer qualify for time limit waivers.”

Mr. Pear indicated that, “The people at risk of losing food aid are 18 to 49 years old. People under 18 or over 49, pregnant women and people who are medically certified as ‘unfit for employment,’ because of a disability, are generally exempt from the time limits.”

Saturday’s article added that, “Participation in the SNAP program more than doubled from 2003 to 2012. In December of last year, 45.2 million people were receiving SNAP benefits. The number has fallen by 2.6 million since reaching a peak in December 2012.”

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#KingCorn- Prospective Plantings for 2016

A news release yesterday from the USDA’s National Agricultural Statistics Service (NASS) stated that, “U.S. corn growers expect to plant 93.6 million acres to corn this year, according to the Prospective Plantings report released today by [NASS]. This is the first increase in corn planted acreage since 2012 and, if realized, will be the third largest corn acreage since 1944.

Driven by the expectations of higher returns in 2016 compared with other crops, corn growers in 41 of the 48 contiguous states expect to either maintain or increase the number of acres they plant to corn. Growers in Illinois, Iowa, Kansas, and North Dakota expect to increase their corn acreage by 400,000 or more acres in 2016.

“In contrast, U.S. soybean growers expect to reverse the recent trends, which saw several record-high years. In 2016, growers expect to plant 82.2 million acres to soybeans, a less than one percent decrease from 2015.”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “Struggling U.S. farmers plan this year to sow their fields with extra corn in a high-stakes gamble to counter sliding prices by selling even more of the grain…Many domestic farmers are grappling with the fallout from three years of declining crop prices and trying to grow their way out of the industry’s slump, even as farm income is expected to drop for a third year, with the forecast $54.8 billion less than half the record in 2013.”

The Journal article noted that, “Corn prices tumbled to a nearly three-month low, dropping 4.2% to $3.51 ½ a bushel.”

Ms. Newman also pointed out that, “The agency’s quarterly report on U.S. grain inventory said corn stockpiles on March 1 totaled 7.81 billion bushels, up from 7.75 billion bushels on the same date last year, and the highest in nearly three decades.”

Christopher Doering reported in today’s Des Moines Register that, “Agriculture remains mired in a stubbornly long period of low commodity prices that has left some producers struggling to cover their costs and forced many to cut back on inputs such as seed and fertilizer to save money. Other farmers have restructured loans or refinanced them against other equity resources so they have enough cash to operate.”

Iowa State University agricultural economist Chad Hart noted yesterday that, “Given trend yields of 168 bushels per acre for corn and 46.7 bushels per acre for soybeans, the projected acreage points to another round of massive crops. Corn production would reach 14.38 billion bushels, which would be another record corn crop. Soybean production would approach 3.8 billion bushels, which would be the 3rd largest soybean crop in history. And for markets already dealing with large supplies, these prospective plantings do not help. So the markets will be looking for Mother Nature to slow the supply train down.”

University of Illinois agricultural economist Darrel Good spoke about the USDA reports in a radio interview yesterday:

And, Dr. Good and Scott Irwin, also of the University of Illinois, held a detailed webinar looking into the yesterday’s USDA reports this morning.

Meanwhile, the Associated Press reported yesterday that, “Inflation-adjusted farm incomes in Minnesota fell to their lowest point in 20 years in 2015 despite record crop yields and this year’s outlook is also grim, according to an annual analysis released Thursday.

“A major factor was the continued decline in commodity prices, the report from the Minnesota State Colleges and Universities system and University of Minnesota Extension said. Unlike 2014, when livestock producers had a very good year, both crop and livestock farms struggled last year.”

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Prices Received for Corn and Soybeans Down From Year Ago Levels

The USDA’s National Agricultural Statistics Service (NASS) released its monthly Agricultural Prices report yesterday, which noted that, “The corn price, at $3.57 per bushel, is down 9 cents from last month and 22 cents below February 2015.”

The NASS report added that, “The soybean price, at $8.51 per bushel, decreased 20 cents from January and $1.40 from February a year earlier.”

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Survey: Iowa Farm Land Values Decline

Donnelle Eller reported on the front page of the business section in today’s Des Moines Register that, “Iowa farmland values have dropped nearly 9 percent over the past year, reflecting lower farm income and commodity prices, a farm real estate group said Wednesday.

“The Iowa Realtors Land Institute farmland survey through March shows the average value of cropland fell to $6,732 an acre, 8.7 percent lower less than a year ago.”

Ms. Eller explained that, “It’s a 22.5 percent decline from 2013, when values climbed to a record $8,690 an acre and U.S. income climbed to $123 billion.”

The Register article noted that, “‘Farm incomes have been dropping, but land values haven’t dropped to the same degree,’ said Steve Bruere, president of Peoples Co., a Clive brokerage and farm management business.

“That has meant that farmland rents have been slow to decline, causing some farmers to default on agreements this spring.”

Ms. Eller added that, “In November, Iowa State University’s farmland survey showed values down 3.9 percent to $7,633 an acre.”

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Borrowing Costs- Cautious Tone on Interest Rate Hikes From Fed Chairwoman

As commodity prices falter and profit margins remain thin, U.S. agricultural producers will be eager to minimize costs of production in 2016.  News reports have indicated that some producers are already cutting back on spending for seed and fertilizer.

With respect to interest ratesBinyamin Applebaum reported in today’s New York Times that, “Janet L. Yellen, the Federal Reserve chairwoman, said on Tuesday that the United States economy remained on track despite a rough start to the year because the drag from weak growth in other countries was being offset by lower borrowing costs.

“Ms. Yellen told the Economic Club of New York that the economy ‘had proven remarkably resilient,’ and that the Fed expected better days ahead. She said the Fed still intended to pursue a careful, patient course toward higher interest rates as the economy improved.

“The cautious tone of her remarks, however, suggested no rate increase was likely at the Fed’s next meeting, in April, shifting the eyes of Fed watchers to its subsequent meeting in June.”

The Times article explained that, “The Fed’s policy-making committee indicated after its most recent meeting, this month, that it now expected to raise rates by about half a percentage point this year.

“That was half as much as the Fed had predicted at the beginning of the year.

“Ms. Yellen attributed the deceleration on Tuesday to a judgment by Fed officials that somewhat lower rates were necessary to maintain steady growth.”

And David Harrison and Michael S. Derby stated in today’s Wall Street Journal that, “Global economic and financial uncertainty poses risks to the U.S. economy and justifies a slower path of interest-rate increases, Federal Reserve Chairwoman Janet Yellen said in remarks that suggested little appetite to raise rates when officials meet next month.”

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Ahead of Government Estimates, Surveys Show More Corn and Soybeans Planted in 2016

Jesse Newman reported yesterday at The Wall Street Journal Online that, “U.S. farmers are expected to plant more corn and soybeans this year even as their storage bins remain stuffed with rising inventory, according to analysts surveyed by The Wall Street Journal.

“The U.S. Department of Agriculture on Thursday will release two closely watched reports on domestic crop stockpiles and farmers’ planting intentions, against a backdrop of historically high global supplies and pressure on U.S. exports caused in part by the strength of the U.S. dollar.”

Ms. Newman noted that, “Analysts expect USDA to estimate that farmers will plant 90.05 million acres of corn, up about 2% from nearly 88 million last year.

“The USDA likely will peg soybean acres at 82.95 million acres, up 0.4% from 82.65 million last year, while all-wheat acreage likely will be estimated at 51.66 million acres, down 5% from 54.64 million in 2015, according to the survey.”

With this background in mind, Bloomberg writer Alan Bjerga indicated yesterday that, “Illinois farmer David Erickson admits that what he and many U.S. farmers are about to do doesn’t seem to make much sense. With bulging stockpiles of corn and soybeans left over from last year’s harvest, they’re planting more in 2016 — even though the crops probably won’t be profitable.”

The Bloomberg article noted that, “After record prices in 2012 sparked a boom in output, corn and soybeans in the Midwest now fetch less than the cost to produce them, and U.S. farm income is headed for a 14-year low. While the market has improved in recent months, researcher AgResource Co. still estimates a $50 loss for every acre sown on average. As they seed more, growers have cut spending and hope better-than-normal yields will help them at least break even.

“Farmers in the U.S., the world’s biggest grower, will expand corn planting to 89.998 million acres, up 2.3 percent from a six-year low in 2015, and soybeans will be sown on 83.07 million acres, the second-most ever, a Bloomberg survey of 33 analysts showed. The U.S. Department of Agriculture will disclose its planting and stockpile estimates on Thursday.”

Mr. Bjerga added that, “With few appealing options, David Seil chose to expand corn planting on his 1,300-acre farm near Gowrie, Iowa. Rather than sacrifice productive land by using it as pasture for his cattle, he’s cutting back on spending for seed and fertilizer and hoping that weather damages crops somewhere else so that prices go up.”

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Not the 1980s, But More Tough Times Ahead

Pat Westhoff, the director of the Food and Agricultural Policy Research Institute at the University of Missouri, indicated in a column on Saturday that, “In the 1980s, farm financial stress was severe. Farm income was low, debt rose to unsustainable levels and a wave of bankruptcies contributed to a crash in farmland values.

This is not the 1980s. The ratio of farm debts to farm assets is much lower now than it was in 1985. Interest rates are far lower, and very few farms are behind on debt payments.

“However, these are difficult times for many U.S. farmers and ranchers. Net farm income is less than half the record level of 2013. Prices are down for almost every major farm commodity, from corn, soybeans and wheat to cattle, hogs and milk.”

Dr. Westhoff added that, “Each year, our institute puts together a 10-year outlook for the U.S. farm economy. Our March 2016 outlook tells the same story we’ve been telling for some time — more tough times are ahead.

“After peaking at $6.89 per bushel for the crop harvested in the drought year of 2012, corn prices have averaged less than $4 per bushel for the past two years. We expect more of the same. Similar stories hold true for soybeans, wheat, sorghum, cotton, rice and almost every other major crop grown in this part of the country.”

Saturday’s column also noted that, “[R]eductions in production costs and the increase in [federal government] payments are not nearly enough to offset the decline in sales receipts. That’s why net farm income has decreased so sharply.”

In a related item regarding the 1980s, DTN Farm Business Advisor Danny Klinefelter noted in an article this week that, “Financial watchdogs are still smarting from the 2008 financial crisis and don’t want to be behind the curve this time. They’ve imposed stricter risk-based capital requirements, more burdensome documentation and more proactively aggressive monitoring. Risk can originate from weaker borrower financial condition, more carryover debt, concentration in the lender’s portfolio and increased counter-party risk (say when a vendor or supplier fails, causing a domino effect on customers).

“Fortunately — as opposed to the 1980s farm financial crisis — ag banks and the Farm Credit System haven’t been responsible for overly aggressive lending. Many have required down payments as large as 50% on farm mortgages. Much of what caused land values rising above amounts lenders would finance has been the result of borrowers pledging other debt-free assets to secure the loan; they’ve used their own money (liquidity) to pay prices above the lendable value of the land purchased.”

Meanwhile, Reuters writers Tom Polansek and Karl Plume reported today that, “Three years into a grain market slump, U.S. farmers are set to plant more corn, taking a calculated gamble that higher sales will help them make up for falling prices without triggering even more declines.

“Forecasts suggest that at current prices growers will be able to cover their variable expenses such as seed and fertilizer. By planting more and scrimping on everything from labor to crop chemicals, farmers hope to cover a portion of hefty fixed costs, including land rents.

“Their strategy marks a reversal from the last time that prices for corn, soybeans and wheat fell for three years running in mid-1980s. At that time, farmers cut production and prices began rising.”

The Reuters article added that, “Barring a weather disaster, more corn planted means a bigger harvest that will add to massive global crop inventories that have kept prices below break-even levels. The swollen stockpiles also make any price recovery unlikely even if U.S. output were to decline.

“With no rebound in sight, cranking up production might be the best shot U.S. farmers have at balancing their books in a falling market, economists say.”

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Sec. Vilsack Offers Perspective on GMO Labeling

Categories: Biotech

Greg Trotter reported late last week at the Chicago Tribune Online that, “Immediately after U.S. Secretary of Agriculture Tom Vilsack concluded his remarks at the Good Food Festival in Chicago Thursday, he was approached by a couple of admirers — and one ardent supporter of GMO labeling who wanted to bend the politician’s ear.

“The debate on labeling products that contain GMOs — genetically modified organisms — has roiled the food and agriculture industries in recent weeks. Many consumers say they have a right to know what’s in their food; those opposed to labeling say it gives the wrong impression the food is unsafe.”

The article noted that, “In a brief interview, Vilsack, a former two-term governor of Iowa, lamented the debate that’s divided the farming community.”

(Recall that Sec. Vilsack also addressed this issue publicly earlier this month).

The Tribune “Q and A” with Sec. Vilasck included this transaction:

“Q: Were you disappointed the bill stalled in the Senate?

“A: I’m disappointed because I think it’s an opportunity at this point in time to bring agriculture together as opposed to continuing this dispute within agriculture.

“So it was a disappointment in that respect. I think it’s also going to create a confusing mixture of ways in which individual companies and individual states are going to approach this issue. I think it begs for some sort of standardization. And I’m hoping that despite the setback that folks in the Senate don’t stop working on this issue and figure out a way to reach common ground.

“Q: Do you think that’s realistic before July 1, before Vermont’s law goes into effect?

“A: I think it’s certainly possible and doable if people spend the time and are willing to understand that they’re not going to get everything they want. That’s the nature of compromise. We seem to have lost the art of compromise in this country, which I think is unfortunate.”

(Recall that Sen. Chuck Grassley (R., Iowa) has noted that it will be difficult to reach an agreement before this summer).

During the Tribune “Q and A” Sec. Vilsack also stated that, “We need to increase innovation and productivity here and around the world, in order to meet the demand for food. I don’t think there’s a full appreciation for how much food we’re going to have to produce to be able to feed 9 billion people. … (Global food security) is an enormous problem that we have got to face and America’s got to lead. And America is leading, but part of that is making sure we have adequate resources and agricultural research.”

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DTN Index- Dim Outlook on Ag Economy

DTN Markets Editor Katie Micik reported today that, “Farmers’ feelings about the ag economy continue to fade while agribusinesses’ sentiment took a steep dive, according to the latest results of the DTN/The Progressive Farmer Agriculture and Agribusiness Confidence Indexes.
“The latest reading of the DTN/The Progressive Farmer Agriculture Confidence Index came in at 91.5, the lowest since DTN began surveying farmers in 2010.  

“That compares to an index value of 92.7 in December and 98.8 in March 2015. An index value of 100 is considered neutral, while higher values indicate optimism and lower values reflect pessimism.”

The DTN article stated that, “Experts estimate the average Kansas farmer’s net income for 2015 will see a loss of $30,000. The forecast is for more of the same in 2016.”

Ms. Micik added that, “The Agribusiness Confidence Index came in at 83.4, down more than 15 points from December’s 98.3 reading and more than 21 points from the previous March’s 104.7 reading.”

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Cash Rent Issues, While Producers Cope with Lower Commodity Prices

University of Illinois agricultural economist Gary Schnitkey indicated recently at the farmdoc daily blog (“Downward Pressures on 2016 and 2017 Cash Rents“) that, “Cash rents on professionally-managed farmland decreased in 2016. In 2017, pressures to lower cash rents will intensify if commodity prices do not increase. In this article, a table is presented that summarizes cash rents for professionally managed and ‘average’ farmland in Illinois for 2014 through 2016. The 2016 cash rents for ‘average’ farmland is a projection.”

In his farmdoc update, Dr. Schnitkey explained that, “Downward pressures will be placed on 2017 cash rents, particularly if commodity prices remain low. Professional farm managers were asked how much they anticipated cash rents to change in 2017 if conditions remain the same as they are currently. When asked, corn prices were near $3.60 per bushel and soybean prices were near $8.70 per bushel. Of the farm managers responding to the survey, 41% expected cash rents to decrease between $25 and $50 per acre while 50% expected decreases in the $5 to $25 per acre range. Only 9% expected cash rents to remain the same, and none expected rents to increase. These expectations point to larger increases in 2017 than in 2016.

Much of the reason for this downward pressure is because farmers are projected to have losses in 2017 on cash rent farmland.”

Recall that earlier this month, The Des Moines Register reported that, “Faced with declining profits, some Iowa farmers are defaulting on cropland rents — a largely unheard of move given the intense competition for the state’s fertile farmland and a sign that financial pressure and debt are mounting.

“With farm real estate debt across the United States at its highest levels since the farm crisis years of the early ’80s, farmers are increasingly nervous about trying to turn a profit while paying sky-high rents.”

In a related item, a news release earlier this week from AgriBank stated that, “Commodity prices are the greatest challenge facing agricultural producers in 2016, according to a poll of Farm Credit directors from America’s heartland.”

Meanwhile, DTN Special Correspondent Elizabeth Williams provided an interesting look at how some producers are coping with lower commodity prices in an article from yesterday (“The Hunt for Profits“).

Ms. Williams stated that, “Tumbling commodity profits have producers scurrying for ways to pump up their bottom line. After controlling costs and better marketing, conventional farmers are looking at other alternatives to bring in extra cash. Organic crops perhaps?”

The DTN article added that, “You can get $8.50 per bushel for organic corn (when conventional corn is selling for $3.80). Organic soybeans can bring $20 per bushel and organic wheat is currently priced around $8 per bushel, according to the Agricultural Marketing Service’s latest bi-weekly report. Those prices have plunged significantly since 2014, but still appear enough to encourage more organic acres.

“Compared with conventional farming, the cost of production for organic commodities can run as low as $5 to $10 per acre more, reported Lynn Clarkson of Clarkson Grain, which buys organic grain and oilseeds, in Cerro Gordo, Illinois. (However, total economic costs of organic compared with conventional production were roughly between $83 and $98 per acre higher for corn, a national 2015 USDA study estimated.)”

The DTN article also pointed out that, “Because organics are still a niche market, you should price your grain or oilseed before you plant it. There are several companies that work on a broad scale such as Clarkson Grain, Scoular Grain, SunOpta and SK Food. You can contact the Organic Trade Association at www.ota.com for resources in your area.”

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Looming Vermont Biotech Labeling Law Causes Change

Categories: Biotech

Bloomberg writers Craig Giammona and Alan Bjerga reported this week that, “The second-smallest U.S. state is forcing a big change in the food industry.

“Kellogg Co., Conagra Foods Inc. and Mars Inc. all announced this week that they will start putting labels on all products made with genetically modified organisms. They followed Campbell Soup Co. and General Mills Inc. in preparing for the July 1 implementation of a Vermont law that requires the change. Creating labels for only one state isn’t feasible, so all packaging has to be overhauled nationwide, executives say.

“Food companies and agribusinesses have spent tens of millions of dollars fighting state ballot initiatives to require GMO labels, hoping to avoid a state-by-state patchwork of laws they argue would be expensive and burdensome. Big Food lobbied Congress for a federal solution but acquiesced to Vermont after a bill died in the U.S. Senate last week amid a partisan stalemate. That means a state with fewer than 630,000 residents is setting the course for a nation of 322 million.”

The Bloomberg writers explained that, “Even as the industry prepares to meet the requirements of the Vermont law, companies like General Mills, Conagra and Kellogg are holding out hope that Congress will find a compromise and establish a federal standard when legislators return from Easter break next month. [Note a related update about the potential difficulty of reaching a compromise in the Senate may be.] Absent that, the concern is that other states will enact laws that are similar but not identical. In that scenario, labels in Vermont might not be compliant with what’s required in other states, said Ken Powell, the chief executive officer of General Mills.

“Kellogg joined General Mills is arguing that creating labels for a single state won’t work. It’s impossible to isolate Vermont in a distribution system designed for interstate commerce, according to Powell.”

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Cuba Trade and U.S. Agriculture

Financial Times writer Shawn Donnan reported today that, “Barack Obama’s historic visit to Cuba this week has been rich in symbolism, but even as the president has lifted restrictions on American companies to do business with the Caribbean nation, one key constituency remains frustrated: the powerful US agriculture lobby.

“Agriculture-related exports to the island, which sits just 90 miles off the Florida coast, have been allowed under US law since 2001 and with Cuba importing 80 per cent of its food, Washington is eager to penetrate a market officials say is worth $2bn a year.”

The FT article explained that, “But after peaking at more than $710m in 2008, US agricultural exports to the country have been steadily falling ever since. Last year they were worth just $180m, according to US trade statistics, giving the US less than 10 per cent market share and leaving it behind Brazil, the EU and Argentina as a source for food in Cuba.

“In an effort to turn that round, the US and Cuba on Monday are set to agree to increase their co-operation on agriculture and improve their technical links. The US is also due to lift restrictions on growers using special research and marketing bodies to pitch their products in Cuba.”

Today’s article pointed out that, “However, the steps do not address the financial restrictions that remain on Cuban buyers of US agricultural products and are thus unlikely to do much in the short term to increase US exports to the Caribbean island.

“Although Cuban buyers have since January been able to use US banks to finance purchases of other imports, those wanting to buy crops or meat produced in the US still have to pay cash up front or use a third-party bank.

Such restrictions are codified into US law and cannot be lifted by executive order, the tool on which Mr Obama has relied to push through his change in Cuba policy. With the Republicans who control Congress determined not to remove the longstanding US trade embargo, that has left the Obama administration’s hands tied and the US agriculture lobby frustrated.”

In conclusion, today’s article stated that: “Mr Obama is making history and US chicken, pork, wheat and soyabean farmers are eager to take advantage. But for the time being, Republicans seem distinctly unwilling to play along.”

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